Lawmakers face power deregulation issue - again

January 24, 2007|by BOB MAGINNIS

Many of the 40 people who gathered last week at South Hagers-town High School to hear Allegheny Energy's rate hike proposal were nervous, as if they were deciding whether to take a ride on an amusement park's scary new roller-coaster.

The bad news is that, barring some unlikely intervention from the Maryland General Assembly, everybody will have to ride. Only instead of holding on for dear life as the coaster dips and turns, riders' most frightening moment could come when they open their power bills a year from now.

That's when the cap on Allegheny's residential rates comes off and the utility begins charging "market rates" for electricity.

At this point, you may be asking yourself the standard poker player's question: "Who dealt this mess?"

Maryland's state lawmakers, that's who. In 1999, a majority of state senators and delegates agreed that more competition would be a good thing.

As part of the deal, Allegheny agreed to hold residential rates steady until the end of 2008.

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Two things went wrong - the cap kept rates so low that no competitors wanted to try to match them. And the state lawmakers who had crafted the deal didn't pay attention to what was happening - or not happening.

That's why they reacted in horror during the 2006 session when Baltimore Gas & Electric proposed a 73 percent rate hike for its customers.

Leaders such as State Senate President Thomas V. "Mike" Miller tried to pin the tail on the Public Service Commission. Thoughtful people realized that Miller's argument made as much sense as running one's car into Hagerstown's City Park Lake, then complaining that the municipality had allowed too much water to accumulate there.

Miller, whose attempt to fire all of the PSC's members was thwarted by the courts, now says he would like them to make a "polite" exit.

For its part, Allegheny is offering some "help" of its own. Instead of socking customers with a rate increase topping 60 percent in 2008, the utility would like to phase in annual increases of 15 percent between now and 2010.

Allegheny officials said that cash would be placed in an interest-bearing account, to be used as credits against future rate hikes.

For the average residential customer who uses 1,000 kilowatt hours of electricity per month, that monthly cost would go from $69.80 to more than $122 in 2010 and 2011.

That's an increase from $837.60 a year to about $1,464 - a boost of more of more than $600.

During the South High meeting, Kenneth D. Schisler, the PSC's chairman, said that because the PSC would later rule on the merits of Allegheny's plan, it could not answer questions that night.

Nevertheless, I stepped to the microphone to ask Allegheny attorney Phil Bray whether any members of the Washington County delegation had any input into the rate proposal and whether any of their suggestions had been incorporated into it.

After the meeting, I gave Bray my business card and asked him to call me. A few days later, Staggers responded and said the following:

"None of the legislators, per se, had any input into the plan we developed.

"They were briefed on what we were thinking about doing, but the legislators didn't weigh in on the specifics of the plan," Staggers said.

That's not to say that they won't have input, but undoing the 1999 deregulation legislation will be about as easy as unringing a bell.

One thing that should be done is to make the creation of power-buying cooperatives easier. The individual homeowner won't get many offers when he or she seeks an alternative to Allegheny. But if 10,000 people joined a buying group, that's a number that should catch utilities' attention.

Will Allegheny Energy's rate-hike proposal win approval? I'm betting it will, with some safeguards added so that those who move out of the utility's service area can get back what they have paid ahead.

Yes, you could save that money yourself, but it's unlikely that the few hundred dollars you put aside each year will earn more interest than if, as Allegheny is proposing, your cash goes into an account with the utility's 215,000 other customers.